March 12th, 2006:

Daily Mail – London: KRTBN; Mar 11, 2006
ON THE SHORTLIST: Oil giant Royal Dutch Shell is understood to have short-listed bidders for its GBP1bn-rated liquefied petroleum gas unit, which will be carved into two.
Ultrapar Participacoes of Brazil and a joint team of private equity firms PAI and Bain have been shortlisted for Shell's UK and French assets. French oil major Total and private Dutch firm SHV want to buy those in the rest of the world. Winners could be announced next week.

Like it or not, Europeans cannot live without Russian gas. The continent already buys 34 per cent of its energy from Russia's state-owned Gazprom, and that could rise to 45 per cent over the next decade. Britain, too, is a net importer following the depletion of reserves in the North Sea.
With that in mind, was it so odd for European president Jose Manuel Barroso to suggest an energy pact with the Russians? Observers were shocked because only last month Gazprom cut off supplies to the Ukraine in a row more about politics than economics. So what is Barroso talking about? Can we trust the Russkies in the future?
It's worth a try, because gas will be far more expensive if we have to import it from another of the world's major suppliers: Iran. But the real point here is that Britain will have far more clout negotiating a supply contract with Moscow if any agreement is with the EU as a whole. Why let Gazprom play off one country against another? A unified approach also means that the EU can exert more pressure on the Russians to open up their gas fields to the likes of Shell and BP.
In return, we may have to let the Russians into Britain – a bid for Centrica by Gazprom is already being discussed. But the more we are tied in with each other, the less threatening is the idea of Russian companies operating in the UK.
None of this means we should put all our eggs in the Russian basket. We still need to invest in renewables, coal and nuclear, as well as look for other sources of gas. But Barroso's idea of an energy pact with Moscow deserves serious consideration. read more

By Sylvia Pfeifer (Filed: 12/03/2006)
Senior oil executives have in recent weeks warned the Government that investment in the North Sea could be at risk in the event that crude prices fall from their current near-record levels, unless ministers rethink their £2bn-a-year tax raid.
With Gordon Brown, the chancellor, set to unveil his Budget in 10 days' time, executives are understood to have told Treasury officials that they want the Government to indicate that the tax will be reversed if oil prices tumble.
The warnings come after Brown's decision in December to double supplementary corporation tax on North Sea oil profits from 10 per cent to 20 per cent. Oil producers were already paying the standard 30 per cent corporation tax, so the 20 per cent supplementary charge has meant that they are now paying a tax rate of 50 per cent.
Brown's move will bring in around £6.5bn more revenue for the Treasury over three years and was announced after a year during which crude prices averaged around $55 a barrel.
“The Government has said it wants to consult with the industry anyway but what is the point of consulting with us on the fiscal regime in general if you ignore completely any consultation on the corporation tax,” said one senior oil company executive.
There is believed to be some disagreement among oil companies as to whether a fixed mechanism – whereby the tax rate would fall in line with the oil price – would be best.
Critics of this idea are concerned that a permanent mechanism would provide not just a floor but also a ceiling; in other words that the tax rate would also rise in line with the oil price.
In recent weeks, Lord Browne, the chief executive of BP, and Jeroen van der Veer, his opposite number at Royal Dutch Shell, have both voiced concerns over the tax increase.
“I do hope the chancellor will look for ways to mitigate the effect of these tax changes on future investment in the North Sea, especially when oil prices go down,” van der Veer told an industry conference last month.
“And a powerful step to encourage that investment would be a commitment to reverse the tax increase if the oil price falls,” he added.
Last night a spokeswoman for the United Kingdom Offshore Operators Association, whose members include industry heavyweights such as BP, Shell, Exxon-Mobil and Chevron, said: “We have made formal representations to the Treasury. We don't believe the current tax rate is sustainable when the oil price tumbles.
“The UK oil and gas province will be severely challenged. . . This is a mature province that faces unique challenges.”
She added that since 1965 there have been only five years (1980, 1981, 1982, 2004 and 2005) during which the oil price averaged over $30 per barrel, “so we cannot assume that we will not see another price tumble”.
The Government has so far rejected the industry's pleas. It has insisted that the tax rise was justified and would not be altered during the present Parliament.
“I would be very surprised if they concede anything,” said another senior oil executive. read more

March 12, 2006
Scotrenewables, an Orkney-based tidal power company, has won the first UK national title at the Shell Springboard awards, which recognise the best small business ideas to combat climate change. Scotrenewables’ prize is a trip to Shell’s Reykjavik hydrogen facility in Iceland later this year. Barry Johnston from Scotrenewables said it was a huge boost for the company, which also receives £40,000 towards establishing and marketing its products.
The former chief executive of Hit Entertainment, maker of Bob the Builder, is to form a new vehicle to invest in intellectual property rights and float it on AIM.
Rob Lawes, who was ousted from Hit in 2004, has formed Ludorum with Charles Caminada, Hit’s former chief operating officer. They plan to raise £5m, with £1m of that coming from management. Lawes said the number of outlets for rights owners, including mobile phones, iPods and the internet, made the industry very attractive.
Hong Kong’s largest quoted infrastructure investor is drawing up an £8 billion bid for Thames Water, Britain’s biggest water company. Cheung Kong Infrastructure Holdings (CKI), majority-owned by Hutchison Whampoa, the Hong Kong-based conglomerate, has held talks with investment banks and potential co-investors within the past week about a potential offer for Thames Water.
CKI is understood to have held talks with Borealis, the Canadian pension fund, about joining forces on a bid for Thames, which is owned by the German utility group RWE. read more

Success in Siberia is vital to restore its reputation and secure reserves. By Tracey Boles in Sakhalin
SAMER SLIM grew up in the heat of Lebanon, but he has made a quick adjustment to the bone-chilling temperatures of Siberia. If it gets above -10C, he works in a T-shirt.
It sounds mad, but -10C feels warm in Siberia, where the temperature can drop to -40C.
Slim is in the frontline of Shell’s ambitious drive to cement its place in the lucrative Russian oil and gas scene. He works on Sakhalin, an island north of Japan off the frozen coast of Siberia. Sakhalin is a narrow island, as long as Britain, and home to oil and gas reserves equal in size to those left in the North Sea.
Slim is in charge of laying a stretch of two 800km pipelines that will carry oil and gas landed from Shell’s offshore fields north of the island to a new, liquefied natural gas (LNG) terminal in the south, where ships are not hindered by sea ice.
It is a mammoth undertaking, and one being closely monitored not only by Shell executives — the company admitted last year that its costs had doubled to $20 billion (£12 billion) — but also by environmentalists, who are highly critical of the project.
Because of this, teams of contractors have to be extremely careful when they lay the pipelines across the island’s 1,000 rivers, streams and brooks.
Each crossing takes an international team of 30 contractors and observers, plus numerous excavators, laying machines and pumps. They aim to complete a river crossing in six to ten hours. Topsoil is restored on the banks and gravel relaid on the river beds so that salmon will be able to spawn.
In oil industry jargon, Sakhalin is an “elephant” — a giant oil and gas field. When complete, Shell’s Sakhalin II development will deliver 150,000 barrels of oil a day and 9.6m tonnes of LNG a year, or 7.5% of current global demand for LNG. The project is central to Shell’s plan to recover from the reserves scandal in 2004 when it had to admit that it had exaggerated its “proved” reserves.
Shell and its minority partners in Sakhalin Energy — Japan’s Mitsui and Mitsubishi — have rights to four billion barrels of the island’s 45 billion oil and gas reserves in the block known as Sakhalin II. It is Shell’s biggest single project, and the largest direct foreign investment in Russia.
Shell will obtain revenues of several billion dollars from the island. Jeroen van der Veer, chief executive, believes the company’s future lies in such huge exploration programmes. The oil giant hopes that Sakhalin will be a stepping stone to an even greater prize, Russia’s vast, untapped Arctic reserves, believed to contain hundreds of billions of barrels of oil and gas.
Chris Finlayson, chairman of Shell in Russia, said: “All natural-resources companies have to go where the natural resources are. Russia has 40% of the world’s natural gas and is the largest oil producer after Saudi Arabia. Russia is by definition very important. It is where the opportunities lie.”
He said Sakhalin would give Shell an “edge” when it competes for contracts in other areas in Russia such as the Arctic and the rest of the Sakhalin shelf, which has nine exploration blocks in total.
However, Sakhalin is an elephant that is proving difficult to control. The scale of the cost increase was a big blow to the oil giant and grist to the mill of those who have criticised the Sakhalin II development.
The timing was delicate for Shell because it is negotiating an asset swap with Gazprom in which the Russian company will take 25% of Sakhalin II. In return, Shell will get cash and a 50% interest in the Zapolyarnoye gas field in West Siberia. The asset swap is expected to be finalised this year.
On Sakhalin itself, local Shell executives are enthusiastic about the project’s prospects. The $1 billion pipelines are due for completion next year and the export facility should be operational by the middle of 2008.
Ian Craig, chief executive of Sakhalin Energy, the Shell consortium installing the new infrastructure, said: “Sakhalin is a world-class oil and gas province. It is close to the consumer markets of Japan, Korea and China that will be driving a lot of future energy demand.”
Besides building the export terminal and the two pipelines down the length of the island, Sakhalin Energy is installing two giant platforms offshore.
The bases of the platforms were put in place last year after being towed from South Korea. Amec, the British company that designed them, said the oil platforms are the biggest of their type in the world.
This year, Sakhalin Energy hopes to arrange $6 billion of new financing with banks that include Japan’s JBIC and the European Bank for Reconstruction and Development, to install the topside of the Lunskoye gas platform, and continue to lay the onshore pipelines.
Sakhalin II has attracted criticism on the island itself, where some feel that the production agreement is slanted too far in Shell’s favour. Craig said Shell will make “substantially less” than the $50 billion Sakhalin II will generate for Russia in royalties and taxes over the next 40 years.
Others feel the project is disrupting the local community as many now work on Sakhalin II instead of its other big industry, fishing. The development employs 17,000 people, including 35% of the island’s population.
The project has caught the attention of environmental groups all over the world because, as well as being located near salmon spawning grounds, it infringes on the feeding grounds of the Western gray whale. There are only 100 of these whales left, including just 23 breeding females.
Local opposition and endangered whales are only two of the obstacles facing Shell as it develops Sakhalin II, however.
Ice floes from the Amur river mean Sakhalin endures Arctic-type conditions for nearly six months of the year. The average winter temperature is -24C. Earthquakes frequently shake the island, which is littered with unexploded ordnance from the second world war.
Shell said the conditions on the frontier project are the most extreme it has had to operate in. The sheer complexity of Sakhalin II has also led the company into difficulty. Its four main elements — the platforms, an onshore processing facility, the pipelines and the LNG terminal — are each expensive undertakings in their own right.
Shell underestimated some of the challenges. Scouring on the seabed from giant ice floes penetrated much deeper than it anticipated, meaning subsea pipelines to the platforms had to be laid more deeply. There were delays in getting approvals. Russian contractors were not experienced in the island’s unique conditions. Drilling did not go as smoothly as planned. The price of materials such as steel rose. The value of the rouble went up. Costs seemed to rise on all fronts until the company was forced to announce the $10 billion overrun last year.
Shell is determined to get Sakhalin II right. It knows it must if it is to stand a chance of winning other frontier exploration contracts in Russia. In December, it failed to make the shortlist for the contract to explore Shtokman on the Barents Sea. It is time for Shell to prove that it has tamed the Sakhalin “elephant”. read more

Mar 11, 2006
Tom Shiel
A FORMER top garda has been appointed by Shell E&P Ireland as an “adviser” in a bid to break the impasse over the Corrib Gas project.
John Carey, who retired last year as Chief Superintendent of the Mayo Garda Division, is to begin work immediately with the multinational company on a part-time basis.
The 900m project to bring gas ashore from the Corrib Field off Co Mayo is bogged down because of a row over the onshore gas pipeline.
Five farmers from Rossport spent 94 days in jail last year because of their opposition to the route of the pipeline.
That controversy is ongoing and work on the onshore pipeline as well as the gas terminal complex at Bellanaboy in Erris has been held up indefinitely.
According to Shell, Mr Carey's job will involve talking to local community groups and relaying their concerns about the gas project back to the Corrib management team.
Shell has embarked on a major public relations drive in recent months. read more

BBC Monitoring Service – United Kingdom; Mar 11, 2006
Nigeria: Oil workers blame government for frequent abductions in Niger Delta
Text of report by Nigerian Rhythm FM radio from Rivers State
Pengassan [Petroleum and Natural Gas Senior Staff Association of Nigeria] and Nupeng [National Union of Petroleum and Natural Gas Workers] have condemned the abduction of nine foreign oil workers at the Shell oil field in Delta State.
A statement signed by Pengassan President, Peter Esele and his Nupeng counterpart said the act would only worsen the situation in the Niger Delta. The group noted that no protest would automatically change an area bedevilled by injustices witnessed in the region. They, however blamed the federal government for its poor attitude towards job creation and youth employment as well as lack of development programmes in the area, which led to youth restiveness.
In a related development, Pengassan and Nupeng have accused the federal government of complicity in the recurring hostage crises in the Niger Delta region. The two main unions in the oil and gas sectors said the federal government has succeeded in institutionalizing hostage taking given its insincerity.
Source: Rhythm FM, Port Harcourt, in English 0600 gmt read more